FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission file number 1-11438
WORLDTEX, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1789271
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
915 Tate Boulevard, S.E., Suite 106, Hickory, North Carolina 28602
(Address of principal executive offices) (Zip Code)
(828) 322-2242
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ------ ------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Date Class Shares Outstanding
----------------------- ----------------------- -----------------------
August 6, 1999 Common Stock 14,271,171
<PAGE>
WORLDTEX, INC.
INDEX
-----
PAGE NUMBER
-----------
PART I - Financial Information
Consolidated Statements of Operations (Unaudited) for the
Three and Six Months Ended June 30, 1999 and 1998 2
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited) for the Three and Six Months Ended June 30,
1999 and 1998 2
Consolidated Balance Sheets at June 30, 1999 (Unaudited)
and December 31, 1998 3
Consolidated Statements of Cash Flows (Unaudited) for the
Six Months Ended June 30, 1999 and 1998 4
Notes to Consolidated Condensed Financial Statements
(Unaudited) 5-12
Management's Discussion and Analysis of Financial Condition
and Results of Operations 13-18
PART II - Other Information 19
<PAGE>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
UNAUDITED
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 73,607 66,054 151,624 135,283
Costs of goods sold 60,090 53,236 124,579 108,413
--------- --------- --------- ---------
Gross profit 13,517 12,818 27,045 26,870
Selling and administrative expense 6,222 6,100 12,073 11,913
Goodwill amortization 687 585 1,529 1,169
--------- --------- --------- ---------
Operating profit 6,608 6,133 13,443 13,788
Interest expense 5,052 4,884 9,958 9,431
Other income - net 524 109 15 345
--------- --------- --------- ---------
Income before income taxes 2,080 1,358 3,500 4,702
Provision for income taxes 820 610 1,425 1,803
--------- --------- --------- ---------
Net income $ 1,260 748 2,075 2,899
========= ========= ========= =========
Net income per share:
Basic $ .09 .05 .15 .20
========= ========= ========= =========
Diluted $ .09 .05 .15 .20
========= ========= ========= =========
Weighted average shares outstanding
Basic 14,271 14,433 14,271 14,431
========= ========= ========= =========
Diluted 14,271 14,735 14,271 14,758
========= ========= ========= =========
</TABLE>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
UNAUDITED
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 1,260 748 2,075 2,899
Other comprehensive loss:
Foreign translation adjustment (5,049) (1,190) (9,806) (1,384)
--------- --------- --------- ---------
Comprehensive income (loss) $(3,789) (442) (7,731) 1,515
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements
<PAGE>
WORLDTEX, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $10,830 6,715
Accounts and notes receivable, less allowance
for doubtful accounts of $2,128 in 1999
and $2,041 in 1998 52,297 42,885
Inventories 59,964 58,515
Prepaid expenses and other current assets 4,321 3,982
--------- ---------
Total current assets 127,412 112,097
Property, plant and equipment - net 110,092 113,652
Other assets 9,237 12,850
Cost in excess of net assets of acquired
businesses, net of accumulated amortization of
$10,952 in 1999 and $9,146 in 1998 81,020 85,521
--------- ---------
$327,761 324,120
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $6,846 7,308
Current installments of long-term debt 455 525
Accounts payable-trade and other liabilities 35,581 29,412
Income taxes payable 1,712 1,700
--------- ---------
Total current liabilities 44,594 38,945
Long-term debt 205,783 198,246
Other long-term liabilities 525 569
Deferred income taxes 11,109 12,878
--------- ---------
Total liabilities 262,011 250,638
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock - -
Common stock (shares issued of 14,701 in 1999 and 147 147
1998)
Paid-in capital 30,084 30,084
Retained earnings 58,243 56,169
Accumulated other comprehensive loss (20,375) (10,569)
Treasury stock, at cost (430 shares in 1999
and 1998) (2,349) (2,349)
--------- ---------
Total stockholders' equity 65,750 73,482
--------- ---------
$327,761 324,120
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements
<PAGE>
WORLDTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
UNAUDITED
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $2,075 2,899
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 6,195 3,639
Amortization 1,529 1,169
Provision for losses on accounts
receivable 303 265
Deferred income taxes (426) (1,162)
Change in assets and liabilities:
Accounts and notes receivable (12,022) (4,033)
Inventories (4,140) (1,657)
Prepaid expenses and other current assets (455) 190
Accounts payable -trade and other
current liabilities 7,839 (79)
Income taxes payable 270 2,199
--------- ---------
Net cash provided by operating activities 1,168 3,430
--------- ---------
Cash flows from investing activities:
Capital expenditures (8,848) (10,745)
Other investing activities 2,153 (177)
--------- ---------
Net cash used in investing activities
(6,695) (10,922)
--------- ---------
Cash flows from financing activities:
Borrowings under line of credit
arrangements 367 4,860
Payments under line of credit
arrangements - (1,101)
Borrowings under revolving credit
facility 38,250 -
Payments under revolving credit facility (29,000) -
Borrowings under long-term loans - -
Payments under long-term loans (1,520) -
Stock issued or (reacquired), net 0 25
Other financing activities 2,575 170
--------- ---------
Net cash provided by financing
activities 10,672 3,954
--------- ---------
Effects of exchange rate changes on cash (1,030) 291
--------- ---------
Net increase (decrease) in cash and
cash equivalents 4,115 (3,247)
Cash and cash equivalents at beginning of year 6,715 14,872
Cash and cash equivalents at end of year
$10,830 11,625
--------- ---------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $9,854 9,868
--------- ---------
Income taxes $3,183 3,101
--------- ---------
</TABLE>
See accompanying notes to consolidated condensed financial statements
<PAGE>
WORLDTEX, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED
(Dollars in thousands)
Note 1 - Basis of Presentation
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position and results of operations for the interim periods reported
hereon. It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's annual report for the fiscal year ended December 31,
1998. The December 31, 1998 amounts included in the financial statements are
derived from December 31, 1998 audited financial statements and notes thereto.
Note 2 - Summary of Significant Accounting Policies
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market. The major classes of inventory are as follows:
<TABLE>
<CAPTION>
December 31,
June 30, 1999 1998
------------- -------------
<S> <C> <C>
Raw materials $ 14,956 16,032
Work-in-process 16,138 14,749
Finished goods 28,870 27,734
--------- ---------
Total inventories $ 59,964 58,515
========= =========
</TABLE>
Property, plant and equipment is recorded at cost and depreciated
primarily using the straight-line method over the estimated useful lives of the
related assets. Repairs and maintenance costs are charged to expense as
incurred. Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
June 30, 1999 1998
------------- -------------
<S> <C> <C>
Land $ 2,932 3,255
Buildings and leasehold improvements 38,318 39,246
Machinery and equipment 112,233 111,417
--------- ---------
153,483 153,918
Less accumulated depreciation and 43,391 40,266
amortization --------- ---------
$110,092 113,652
========= =========
</TABLE>
Note 3 - New Accounting Standard
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133
requires all derivatives to be recorded on the balance sheet at fair value and
establishes special accounting standards for derivatives that qualify as fair
value hedges, cash flow hedges and hedges of foreign currency exposures of net
investments in foreign operations. Management is evaluating the impact of the
adoption of SFAS No. 133 on the Company's financial position and operations.
Note 4 - Supplemental Consolidating Financial Information
Long-term debt includes $175,000 of senior notes which are guaranteed by
each of the U.S. subsidiaries of the Company. The guarantor subsidiaries are
Notes to consolidated condensed financial statements
<PAGE>
wholly-owned subsidiaries of the Company and the guarantees are full,
unconditional and joint and several. There are no restrictions on the ability of
the guarantor subsidiaries to make distributions to the Company, except those
generally applicable under relevant corporation laws. Separate financial
statements of each guarantor subsidiary have not been presented because
management has determined that they are not material to investors. The following
pages include summarized consolidating financial information for the Company,
segregating the parent, the guarantor subsidiaries and nonguarantor
subsidiaries.
Notes to consolidated condensed financial statements
<PAGE>
WORLDTEX, INC.
Note 4 - Supplemental Consolidating Financial Information
(Dollars in thousands)
<TABLE>
<CAPTION>
Consolidating Statements of Operations
Three Months Ended June 30, 1999
Guarantor Non-Guarantor
Domestic Foreign
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - 52,732 28,467 (7,592) 73,607
Cost of goods sold - 44,730 22,952 (7,592) 60,090
--------- --------- --------- --------- ---------
Gross profit - 8,002 5,515 - 13,517
Selling and administrative
expense 1,051 3,488 2,370 - 6,909
--------- --------- --------- --------- ---------
Operating profit (loss) (1,051) 4,514 3,145 - 6,608
Interest expense 4,523 143 386 - 5,052
Intercompany interest
(income) expense (2,651) 2,442 209 - -
Intercompany administrative
charges (654) 403 251 - -
Other income (expense) - net 243 13 268 - 524
--------- --------- --------- --------- ---------
Income (loss) before income
taxes (2,026) 1,539 2,567 - 2,080
Provision (benefit) for
income taxes (771) 685 906 - 820
Undistributed earnings of
subsidiaries 2,515 - - (2,515) -
--------- --------- --------- --------- ---------
Net income $ 1,260 854 1,661 (2,515) 1,260
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Consolidating Statements of Operations
Three Months Ended June 30, 1998
Guarantor Non-Guarantor
Domestic Foreign
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - 37,813 32,707 (4,466) 66,054
Cost of goods sold - 31,617 26,085 (4,466) 53,236
--------- --------- --------- --------- ---------
Gross profit - 6,196 6,622 - 12,818
Selling and administrative
expense 1,029 3,031 2,625 - 6,685
--------- --------- --------- --------- ---------
Operating profit (loss) (1,029) 3,165 3,997 - 6,133
Interest expense 4,440 154 290 - 4,884
Intercompany interest
(income) expense (2,379) 2,025 354 - -
Intercompany administrative
charges (728) 477 251 - -
Other income (expense) - net 159 13 (63) - 109
--------- --------- --------- --------- ---------
Income (loss) before income
taxes (2,203) 522 3,039 - 1,358
Provision (benefit) for
income taxes (626) 140 1,096 - 610
Undistributed earnings of
subsidiaries 2,325 - - (2,325) -
--------- --------- --------- --------- ---------
Net income $ 748 382 1,943 (2,325) 748
========= ========= ========= ========= =========
</TABLE>
Notes to consolidated condensed financial statements
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
Note 4 - Supplemental Consolidating Financial Information
(Dollars in thousands)
Consolidating Statements of Operations
Six Months Ended June 30, 1999
Guarantor Non-Guarantor
Domestic Foreign
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - 106,176 59,529 151,624 (14,081)
Cost of goods sold - 90,534 48,126 (14,081) 124,579
Gross profit - 15,642 11,403 - 27,045
--------- --------- --------- --------- ---------
Selling and administrative
expense 1,769 7,123 4,710 - 13,602
Operating profit (loss) (1,769) 8,519 6,693 - 13,443
--------- --------- --------- --------- ---------
Interest expense 9,052 236 670 - 9,958
Intercompany interest
(income) expense (5,352) 4,911 441 - -
Intercompany administrative
charges (1,308) 807 501 - -
Other income (expense) - net 296 38 (319) - 15
--------- --------- --------- --------- ---------
Income (loss) before income
taxes (3,865) 2,603 4,762 - 3,500
Provision (benefit) for
income taxes (1,515) 1,237 1,703 - 1,425
Undistributed earnings of
subsidiaries 4,425 - - (4,425) -
--------- --------- --------- --------- ---------
Net income $ 2,075 1,366 3,059 (4,425) 2,075
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Consolidating Statements of Operations
Six Months Ended June 30, 1998
Guarantor Non-Guarantor
Domestic Foreign
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - 76,504 66,284 (7,505) 135,283
Cost of goods sold - 63,170 52,748 (7,505) 108,413
--------- --------- --------- --------- ---------
Gross profit - 13,334 13,536 - 26,870
Selling and administrative
expense 1,758 6,226 5,098 - 13,082
--------- --------- --------- --------- ---------
Operating profit (loss) (1,758) 7,108 8,438 - 13,788
Interest expense 8,593 292 546 - 9,431
Intercompany interest
(income) expense (4,618) 3,914 704 - -
Intercompany administrative
charges (1,455) 954 501 - -
Other income (expense) - net 368 29 (52) - 345
--------- --------- --------- --------- ---------
Income (loss) before income
taxes (3,910) 1,977 6,635 - 4,702
Provision (benefit) for
income taxes (1,201) 645 2,359 - 1,803
Undistributed earnings of
subsidiaries 5,608 - - (5,608) -
--------- --------- --------- --------- ---------
Net income $ 2,899 1,332 4,276 (5,608) 2,899
========= ========= ========= ========= =========
</TABLE>
Notes to consolidated condensed financial statements
<PAGE>
<TABLE>
<CAPTION>
WORLDTEX, INC.
Note 4 - Supplemental Consolidating Financial Information
(Dollars in thousands)
Consolidating Balance Sheet
June 30, 1999
Guarantor Non-Guarantor
Domestic Foreign
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ - 6 10,824 - 10,830
Accounts and notes
receivable, net - 31,280 21,017 - 52,297
Inventories - 37,672 22,292 - 59,964
Prepaid expenses and other
current assets 3,548 80 693 - 4,321
--------- --------- --------- --------- ---------
Total current assets 3,548 69,038 54,826 - 127,412
Property, plant and
equipment, net 2,201 59,809 48,082 - 110,092
Other assets 6,595 1,539 1,103 - 9,237
Cost in excess of net assets
of acquired businesses, net (192) 66,032 15,180 - 81,020
Intercompany investments 102,440 - - (102,440) -
Intercompany advances 160,286 14,798 - (175,084) -
--------- --------- --------- --------- ---------
$274,878 211,216 119,191 (277,524) 327,761
========= ========= ========= ========= =========
Liabilities and Stockholders'
Equity
Current liabilities
Short-term borrowings $ - - 6,846 - 6,846
Current installments of
long-term debt - - 455 - 455
Accounts payable-trade and
other liabilities 3,969 15,568 16,044 - 35,581
Income taxes payable 1,120 (1,217) 1,809 - 1,712
--------- --------- --------- --------- ---------
Total current liabilities 5,089 14,351 25,154 - 44,594
Long-term debt 196,250 6,000 3,533 - 205,783
Other long-term liabilities - - 525 - 525
Deferred income taxes (7,009) 7,699 10,419 - 11,109
Intercompany payables
14,798 149,221 11,065 (175,084) -
--------- --------- --------- --------- ---------
Total liabilities 209,128 177,271 50,696 (175,084) 262,011
--------- --------- --------- --------- ---------
Stockholders' equity
Preferred stock - - - - -
Common stock 147 49 34,028 (34,077) 147
Paid-in capital 30,084 15,822 - (15,822) 30,084
Retained earnings 58,243 18,074 54,842 (72,916) 58,243
Accumulated other
comprehensive loss (20,375) - (20,375) 20,375 (20,375)
Less-treasury stock, at cost (2,349) - - - (2,349)
--------- --------- --------- --------- ---------
Total stockholders' equity
65,750 33,945 68,495 (102,440) 65,750
$274,878 211,216 119,191 (277,524) 327,761
========= ========= ========= ========= =========
</TABLE>
Notes to consolidated condensed financial statements
<PAGE>
WORLDTEX, INC.
Note 4 - Supplemental Consolidating Financial Information
(Dollars in thousands)
<TABLE>
<CAPTION>
Consolidating Balance Sheet
December 31, 1998
Guarantor Non-Guarantor
Domestic Foreign
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 2,596 14 4,105 - 6,715
Accounts and notes
receivable, net - 19,486 23,399 - 42,885
Inventories - 33,815 24,700 - 58,515
Prepaid expenses and other
current assets 2,594 183 1,205 - 3,982
--------- --------- --------- --------- ---------
Total current assets 5,190 53,498 53,409 - 112,097
Property, plant and
equipment, net 337 58,710 54,605 - 113,652
Other assets 9,240 2,456 1,154 - 12,850
Cost in excess of net assets
of acquired businesses, net - 68,048 17,473 - 85,521
Intercompany investments 105,572 - - (105,572) -
Intercompany advances 155,820 14,798 - (170,618) -
--------- --------- --------- --------- ---------
$276,159 197,510 126,641 (276,190) 324,120
========= ========= ========= ========= =========
Liabilities and Stockholders'
Equity
Current liabilities
Short-term borrowings $ - - 7,308 - 7,308
Current installments of
long-term debt - - 525 - 525
Accounts payable-trade and
other liabilities 5,216 9,440 14,756 - 29,412
Income taxes payable 1,091 (1,641) 2,250 - 1,700 -
--------- --------- --------- --------- ---------
Total current liabilities 6,307 7,799 24,839 - 38,945
Long-term debt 187,000 6,000 5,246 - 198,246
Other long-term liabilities - - 569 - 569
Deferred income taxes (5,428) 6,870 11,436 - 12,878
Intercompany payables 14,798 144,260 11,560 (170,618) -
--------- --------- --------- --------- ---------
Total liabilities 202,677 164,929 53,650 (170,618) 250,638
--------- --------- --------- --------- ---------
Stockholders' equity
Common stock 147 49 31,778 (31,827) 147
Paid-in capital 30,084 15,822 - (15,822) 30,084
Retained earnings 56,169 16,710 51,782 (68,492) 56,169
Accumulated other
comprehensive loss (10,569) - (10,569) 10,569 (10,569)
Less-treasury stock, at cost (2,349) - - - (2,349)
--------- --------- --------- --------- ---------
Total stockholders' equity 73,482 32,581 72,991 (105,572) 73,482
--------- --------- --------- --------- ---------
$276,159 197,510 126,641 (276,190) 324,120
========= ========= ========= ========= =========
</TABLE>
Notes to consolidated condensed financial statements
<PAGE>
WORLDTEX, INC.
Note 4 - Supplemental Consolidating Financial Information
(Dollars in thousands)
<TABLE>
<CAPTION>
Consolidating Statements of Cash Flows
Six Months Ended June 30, 1999
Guarantor Non-Guarantor
Domestic Foreign
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 2,075 1,366 3,059 (4,425) 2,075
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Undistributed earnings of
subsidiaries (4,425) - - 4,425 -
Depreciation and
amortization 12 4,833 2,879 - 7,724
Provision for losses on
accounts receivable - 93 210 - 303
Deferred income taxes (1,582) 828 328 - (426)
Change in assets and
liabilities:
Accounts and notes
receivable - (11,886) (136) - (12,022)
Inventories - (3,856) (284) - (4,140)
Prepaid expenses and other
current assets (955) 102 398 - (455)
Accounts payable - trade
and other current
liabilities (1,245) 6,125 2,959 - 7,839
Income taxes payable 29 424 (183) - 270
Net cash provided by --------- --------- --------- --------- ---------
(used in) operating
activities (6,091) (1,971) 9,230 - 1,168
--------- --------- --------- --------- ---------
Cash flows from investing
activities:
Capital expenditures (1,876) (4,650) (2,322) - (8,848)
Acquisitions, net of cash
acquired (2,250) - - 2,250 -
Other investing activities 589 1,652 (88) - 2,153
Net cash used in --------- --------- --------- --------- ---------
investing activities (3,537) (2,998) (2,410) 2,250 (6,695)
--------- --------- --------- --------- ---------
Cash flows from financing
activities:
Borrowings under line of
credit arrangements - - 367 - 367
Payments under line of
credit arrangements - - - - -
Borrowings under revolving
credit facility 38,250 - - - 38,250
Payments under revolving
credit facility (29,000) - - - (29,000)
Borrowing under long-term
loans - - - - -
Payments under long-term
loans - - (1,520) - (1,520)
Stock issued or
(reacquired), net - - - - -
Advances - affiliated
companies (4,465) 4,961 (742) 246 -
Other financing activities 2,247 - 2,574 (2,246) 2,575
Net cash provided by --------- --------- --------- --------- ---------
financing activities 7,032 4,961 679 (2,000) 10,672
Effects of exchange rate --------- --------- --------- --------- ---------
changes in cash - - (780) (250) (1,030)
Net increase (decrease) in --------- --------- --------- --------- ---------
cash (2,596) (8) 6,719 - 4,115
Cash at beginning of year 2,596 14 4,105 - 6,715
--------- --------- --------- --------- ---------
Cash at end of period $ - 6 10,824 - 10,830
========= ========= ========= ========= =========
</TABLE>
Notes to consolidated condensed financial statements
<PAGE>
WORLDTEX, INC.
Note 4 - Supplemental Consolidating Financial Information
(Dollars in thousands)
<TABLE>
<CAPTION>
Consolidating Statements of Cash Flows
Six Months Ended June 30, 1998
Guarantor Non-Guarantor
Domestic Foreign
WORLDTEX, INC. SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 2,899 1,332 4,276 (5,608) 2,899
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Undistributed earnings of
subsidiaries (5,608) - - 5,608 -
Depreciation and
amortization 17 2,732 2,059 - 4,808
Provision for losses on
accounts receivable - 152 113 - 265
Deferred income taxes (2,220) 863 195 - (1,162)
Change in assets and
liabilities:
Accounts and notes
receivable (181) (2,464) (1,388) - (4,033)
Inventories - (1,865) 208 - (1,657)
Prepaid expenses and other
current assets (461) 311 340 - 190
Accounts payable - trade
and other current
liabilities (1,043) 2,419 (1,455) - (79)
Income taxes payable 927 (185) 1,457 - 2,199
Net cash provided by --------- --------- --------- --------- ---------
(used in) operating
activities (5,670) 3,295 5,805 - 3,430
--------- --------- --------- --------- ---------
Cash flows from investing
activities:
Capital expenditures 12 (4,752) (6,005) - (10,745)
Acquisitions, net of cash
acquired 1,436 - - (1,436) -
Other investing activities 139 (358) (65) 107 (177)
Net cash provided by (used --------- --------- --------- --------- ---------
in) investing Activities 1,587 (5,110) (6,070) (1,329) (10,922)
--------- --------- --------- --------- ---------
Cash flows from financing
activities:
Borrowings under line of
credit arrangements - - 4,860 - 4,860
Payments under line of
credit arrangements - - (1,101) - (1,101)
Borrowings under revolving
credit facility - - - - -
Payments under revolving
credit facility - - - - -
Stock issued or
(reacquired), net 25 - - - 25
Advances - affiliated
companies (2,593) 1,587 1,104 (98) -
Other financing activities (62) - 527 170 (295)
Net cash provided by (used --------- --------- -------- --------- ---------
in) financing activities (2,630) 1,587 5,390 (393) 3,954
Effects of exchange rate --------- --------- --------- --------- ---------
changes in cash (1,387) - (44) 291 1,722
Net increase (decrease) in --------- --------- --------- --------- ---------
cash (8,100) (228) 5,081 - (3,247)
Cash at beginning of year 10,058 321 4,493 - 14,872
--------- --------- --------- --------- ---------
Cash at end of period $ 1,958 93 9,574 - 11,625
========= ========= ========= ========= =========
</TABLE>
Notes to consolidated condensed financial statements
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
The following table sets forth the percentages which certain income and expense
items bear to net sales:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Gross margin 18.4% 19.4% 17.8% 19.9%
----- ----- ----- -----
Selling & administrative expense 8.5% 9.2% 8.0% 8.8%
Goodwill amortization .9% .9% .9% .9%
----- ----- ----- -----
Operating profit 9.0% 9.3% 8.9% 10.2%
Interest expense 6.9% 7.4% 6.6% 7.0%
Other income - net .7% .2% -. % .3%
----- ----- ----- -----
Income before income taxes 2.8% 2.1% 2.3% 3.5%
===== ===== ===== =====
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
- --------------------------------------------------------------------
For the quarter ended June 30, 1999, sales increased by $7.6 million or 11.4%
compared with the 1998 quarter. In general, sales increases were attributable to
higher unit volume, partially offset by lower unit pricing. Quarterly revenues
benefited from the acquisition of a narrow elastics manufacturing facility from
Fruit of the Loom in December 1998. This acquisition, as well as organic growth
of approximately 10%, led to total sales of narrow elastic fabrics of $31.4
million compared with $20.6 million in the 1998 quarter. Covered elastic yarn
sales were $42.2 million for the quarter compared with $45.5 million in the
prior year, a decline of 7%. The decline was due to continued demand and
currency issues in Europe, which offset year over year growth in the Americas of
approximately 8%.
Gross profit for the three months ended June 30, 1999 was $13.5 million or 18.4%
compared to $12.8 million or 19.4% for the same period in 1998. The decrease was
due to higher depreciation and changes in product mix. Selling and
administrative expenses and goodwill amortization for the three months ended
June 30, 1999 were $6.9 million or 9.4% of sales as compared to $6.7 million or
10.1% of sales for the same period in 1998. As a result, operating income was
$6.6 million and $6.1 million for the three months ended June 30, 1999 and June
30, 1998, respectively.
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operating profit plus depreciation and amortization ("EBITDA") for the three
months ended June 30, 1999 and 1998 was $10.4 million and $8.6 million,
respectively.
Other income for the quarter increased $.4 million due to foreign currency
gains. These gains offset first quarter foreign currency losses relating to
certain intercompany financing transactions in 1999.
Interest expense for the three months ending June 30, 1999 increased from the
corresponding period in 1998 by $.2 million due to additional debt associated
with the Fruit of the Loom acquisition in December 1998.
The Company had an effective income tax rate of 39.4% for the three months ended
June 30, 1999 compared to 44.9% for the same period in 1998. This decrease
resulted primarily because of higher pre-tax income in relation to goodwill
amortization and other non-deductible items.
As a result of the above, net income was $1.3 million and $.7 million for the
three months ended June 30, 1999 and 1998, respectively. Diluted income per
share was $.09 for the 1999 three month period compared with $.05 in 1998.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
- ------------------------------------------------------------------
For the six months ended June 30, 1999, sales increased by $16.3 million or
12.1% compared to the six months ended June 30, 1998. In general, sales
increases were attributable to higher unit volume, partially offset by lower
unit pricing. The Fruit of the Loom acquisition, as well as organic growth of
approximately 8%, led to total sales of narrow elastic fabrics of $63.4 million
for the six months ended June 30, 1999 compared to $42.2 million for the same
period of 1998. Covered elastic yarn revenues were $88.3 million for the six
months ended June 30, 1999, which were approximately 5% below revenues of $93.0
million for the same period in 1998. The decline was due to continued demand and
currency issues in Europe, which offset year over year growth in the Americas of
approximately 7%.
Gross profit for the six months ended June 30, 1999 was $27.0 million or 17.8%
compared to $26.9 million or 19.9% for the same period in 1998. The decrease was
due to higher depreciation and changes in product mix. Selling and
administrative expenses and goodwill amortization for the six months ended June
30, 1999 were $13.6 million or 8.9% of sales as compared to $13.1 million or
9.7% of sales for the same period in 1998. As a result, operating income was
$13.4 million and $13.8 million for the six months ended June 30, 1999 and June
30, 1998, respectively.
EBITDA for the six months ended June 30, 1999 and 1998 was $21.2 million and
$18.6 million, respectively.
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Interest expense for the six months ending June 30, 1999 increased from the
corresponding period in 1998 by $.5 million due to additional debt associated
with the Fruit of the Loom acquisition in December 1998.
The Company had an effective income tax rate of 40.7% for the six months ended
June 30, 1999 compared to 38.3% for the same period in 1998. This increase
resulted primarily because of lower pre-tax income in relation to goodwill
amortization and other non-deductible items and a reduced state tax benefit for
certain state net operating loss carryforwards.
As a result of the above, net income was $2.1 million and $2.9 million for the
six months ended June 30, 1999 and 1998, respectively. Diluted income per share
was $.15 for the 1999 six month period compared with $.20 in 1998.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company meets both its long-term and short-term liquidity needs through
internally generated funds and outside borrowings.
Cash totaled $10.8 million at June 30, 1999, representing a net increase of $4.1
million for the six months then ended. Cash flows from operating activities and
from financing activities are the principal indicators of the Company's
liquidity. During the first six months of 1999, $1.2 million was generated from
operating activities as a result of net income, adjusted for the effects of
depreciation and amortization and changes in the balances of receivables,
payables, inventories and prepaid expenses and other current assets. During the
first six months of 1999, $8.8 million was utilized for the purchase and
upgrading of equipment and facilities. The Company anticipates that its capital
expenditures during 1999 will approximate $15 million, primarily for the
purchase of equipment. In addition, the Company anticipates $3 to $5 million of
the total will be spent for management information systems (see "Year 2000
Compliance" below).
EBITDA is provided as additional information relating to the Company's debt
service capacity. EBITDA for the six months ended June 30, 1999 and 1998 was
$21.2 million and $18.6 million, respectively. Depreciation and amortization for
the six months ended June 30, 1999 and 1998 was $7.7 million and $4.8 million,
respectively. The Company had previously announced that, effective October 1,
1998, it shortened the asset lives on certain manufacturing equipment associated
with its covered elastic yarn business. Asset lives for existing equipment were
shortened to approximately 10 to 14 years, on average, as compared to 14 to 20
years in the past. The new policy also applies to all new capital expenditures.
Annual depreciation expense for 1999 will be in an estimated range of $12 to $13
million, with the increased depreciation having no effect on EBITDA. During the
first six months, depreciation expense was $6.2 million, an increase of $2.6
million or 70.2% from the same period ended 1998. Approximately $2.0 million of
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
the increase resulted from the change in lives, which affected the six months
ended June 30, 1999 earnings per share by $.08.
Working capital was $82.8 million at June 30, 1999 and $73.2 million at December
31, 1998, reflecting a increase of $9.6 million and current ratios of 2.9 at
June 30, 1999 and December 31, 1998.
The Company has a domestic revolving credit facility that provides for revolving
credit borrowings in an aggregate principal amount of up to $25.0 million. The
revolving credit facility terminates and all amounts borrowed thereunder will be
due December 1, 2002. Loans under the revolving credit facility bear interest at
rates based upon a base rate (the higher of the Bank of America, N.A. prime rate
or the Federal Funds rate), certificates of deposit rates or Eurodollar rates,
in each case plus an applicable margin. Loans under the revolving credit
facility are guaranteed by all U.S. subsidiaries of the Company and are required
to be secured by liens on the accounts receivable and inventory of the Company
and its U.S. subsidiaries, 100% of the outstanding capital stock of the
Company's U.S. subsidiaries and 65% of the outstanding capital stock of each of
the non-U.S. subsidiaries.
At June 30, 1999, the Company had indebtedness of $21.3 million and $3.7 million
was available for future borrowings under the domestic credit facility. In
addition, at such date the Company's foreign subsidiaries had $22.0 million of
U.S. dollar equivalent credit availability under bank lines of credit, of which
$6.8 million was outstanding as of June 30, 1999. The Company's most restrictive
loan covenant limits short-term borrowings by the Company's foreign subsidiaries
to a total of $15.0 million. Worldtex believes that these lines of credit,
together with internally generated funds and access to other financing sources,
will provide sufficient liquidity for the Company's expected short-term and
long-term cash requirements.
YEAR 2000 COMPLIANCE
- --------------------
Many existing computer programs in use around the world use only the last two
digits to define a year rather than four digits and do not take account of the
change in century that will occur in the year 2000. If this problem is not
corrected, computer applications could fail or create mistakes. Worldtex
established a Year 2000 project team in 1998 and retained an independent
consulting group to provide assistance in assessing Year 2000 risks and to
provide recommendations for remediation. The project scope includes both
information technology and computer based embedded technology. The project team
has focused its efforts on information systems software and hardware,
manufacturing equipment and facilities, and third-party relationships.
The Company adopted a multi-step approach in conducting the Year 2000 project
consisting of: (1) identification, (2) assessment and prioritizing, (3)
remediation (including upgrading and replacement) and testing, and (4)
contingency planning. The identification step was completed in April 1998. Step
two was completed in August 1998. The Company has begun a worldwide business
system replacement project that uses programs primarily from one vendor. The new
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
systems are expected to make approximately 80 percent of the Company's business
computer systems Year 2000 compliant and are scheduled to be complete during the
third quarter of 1999. Remediation for other information systems and computer
based embedded technology systems is approximately 50 percent complete and is
scheduled to be complete by December 31, 1999. The Company has initiated formal
communications with its significant suppliers, customers, and other business
partners to determine the extent the Company may be vulnerable in the event
those parties fail to properly remediate their own Year 2000 issues. Monitoring
and testing of critical system interfaces will be performed as the Year 2000
approaches.
The estimated cost for the Year 2000 project, including worldwide business
system replacement, is approximately $5 to $7 million. The Company estimates
that $3 to $5 million will be capitalized as hardware and software purchases.
The remaining cost will be expensed as incurred during the remediation period.
The Company had incurred approximately $2.8 million in external costs as of June
30, 1999, primarily for the purchase of software and hardware.
The Company believes, although it cannot assure, that its internal systems and
equipment will be Year 2000 compliant in a timely manner. In addition, the
Company cannot predict whether systems of third parties will be Year 2000
compliant in a timely manner. The implementation of new business systems and
completion of the Year 2000 project as scheduled will reduce the possibility of
significant interruptions of normal operations. The Company believes its most
likely worst case scenario is the disruption of the distribution system (product
delays from suppliers and/or delayed orders from customers) which could result
in the reduction or suspension of the Company's operations. The Company has not
developed a specific Year 2000 contingency plan. Contingency plans will be
addressed as additional information is available regarding the Company's
remediation and testing steps and the status of third-party Year 2000 readiness.
EUROPEAN MONETARY UNION - EURO
- ------------------------------
The Company conducts business in multiple currencies, including the currencies
of various European countries in the European Union which are participating in
the single European currency by adopting the Euro as their common currency on
January 1, 1999, the date that the Euro began trading on currency exchanges. The
legal currencies of the participating countries will remain legal tender for a
transition period between January 1, 1999 and January 1, 2002. During the
transition period, wire transfers can be made using the Euro with payment for
goods and services in either the Euro or the legacy currency. Between January 1,
2002 and July 1, 2002, the participating countries will introduce Euro notes and
coins and eventually withdraw all legacy currencies. Currency rates during the
transition period will no longer be computed from one legacy to another but
instead will first be converted into the Euro. The Company is addressing the
issues involved with the introduction of the Euro and the impact on its
business, both strategically and operationally. Based on current information,
the Company does not expect the Euro conversion to have a material adverse
effect on the financial position or results of operations of the Company.
<PAGE>
WORLDTEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
- --------------------------
Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations which are other than historical facts are
intended to be "forward-looking statements" within the meaning of federal
securities laws. Words such as "expects", "believes", "anticipates", "projects",
"estimates", "plan", variations of such words and other similar expressions are
intended to identify such forward-looking statements. These statements are
subject to various risks and uncertainties, many of which are outside the
control of the Company. Risks and uncertainties include, but are not limited to,
the financial strength of the apparel industry, the level of consumer spending
for apparel, changing consumer preferences, the competitive pricing environment
within the apparel industry, foreign currency translation, success of new
product introductions, and other risk factors. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in, or
implied by, such forward-looking statements, which reflect management's judgment
only as of the date hereof. The Company does not intend to update publicly this
information to reflect new information, future events or otherwise
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ----------------------------------------------------------
There has been no significant change in market risk during the first six months
of 1999 from that which was reported in the Company's annual report on Form 10-K
for 1998 filed March 30, 1999.
<PAGE>
WORLDTEX, INC.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of stockholders on May 20, 1999. At the
meeting, the following persons were elected as directors of the Company by the
votes indicated below:
<TABLE>
<CAPTION>
NAME AUTHORITY FOR WITHHELD
- ---- ------------- --------
<S> <C> <C>
John B. Fraser 9,828,592 134,056
Willi Roelli 9,807,186 155,462
Michael B. Wilson 9,828,592 134,056
</TABLE>
In addition, the terms as directors of the Company of Claude D. Egler, Salim M.
Ibrahim, Barry D. Setzer, and John K. Ziegler continued after the annual
meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
10.1 Second Amendment to Credit Agreement and Waiver, dated
as of June 29, 1999, among Worldtex, the Guarantors, the
Lenders and NationsBank, N.A., as Agent - filed herewith
11.1 Computation of earnings per share - filed herewith
27.1 Financial Data Schedule (filed with EDGAR only)
(b) Reports on Form 8-K.
During the quarter ended June 30, 1999, the Company did not file any
reports on Form 8-K.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORLDTEX, INC.
(Registrant)
Date: August 13, 1999 By: /S/ MARTY R. KITTRELL
----------------------
Marty R. Kittrell
Senior Vice President
and Chief Financial
Officer
Exhibit 10.1
SECOND AMENDMENT TO
CREDIT AGREEMENT AND WAIVER
THIS SECOND AMENDMENT TO CREDIT AGREEMENT AND WAIVER dated as of June 29,
1999 (the "Amendment") is entered into among Worldtex, Inc., a Delaware
corporation (the "Borrower"), the Domestic Subsidiaries of the Borrower, as
Guarantors, the Lenders party thereto and NationsBank, N.A., as Agent. All
capitalized terms used herein and not otherwise defined herein shall have the
meanings given to such terms in the Credit Agreement (as defined below).
RECITALS
--------
WHEREAS, the Borrower, the Guarantors, the Lenders and the Agent entered
into that certain Credit Agreement dated as of December 1, 1997, as amended by
that certain First Amendment to Credit Agreement dated as of March 29, 1999 (as
further amended and modified from time to time, the "CREDIT AGREEMENT");
WHEREAS, the Borrower acknowledges that an Event of Default currently
exists under the Credit Agreement (the "EXISTING DEFAULT") as a result of the
failure of the Borrower and its Domestic Subsidiaries to comply with the terms
of Section 7.9(c) of the Credit Agreement as of the fiscal quarter ending March
31, 1999;
WHEREAS, the Borrower has requested that the Lenders waive the Existing
Default and continue to make available to the Borrower the Loans provided under
the Credit Agreement;
WHEREAS, the Lenders are willing to waive the Existing Default subject to
the terms and conditions specified in this Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. REAFFIRMATION OF EXISTING DEBT. The Credit Parties acknowledge and
confirm (a) that the Agent, on behalf of the Lenders, has a valid and
enforceable first priority security interest in the Collateral, (b) that the
Borrower's obligation to repay the outstanding principal amount of the Loans and
reimburse the Issuing Lender for any drawing on a Letter of Credit is
unconditional and not subject to any offsets, defenses or counterclaims, (c)
that, to the best of their knowledge, the Agent and the Lenders have performed
fully all of their respective obligations under the Credit Agreement and the
other Credit Documents, and (d) by entering into this Amendment, the Lenders do
not waive (except as specifically provided in Section 2 hereof) or release any
term or condition of the Credit Agreement or any of the other Credit Documents
or any of their rights or remedies under such Credit Documents or applicable law
or any of the obligations of any Credit Party thereunder.
<PAGE>
2. WAIVER. Subject to the other terms and conditions of this Amendment, the
Agent and the Lenders hereby waive the Existing Default. Except for the waiver
contained herein, this Amendment does not modify or affect the obligations of
the Credit Parties to comply fully with all terms, conditions and covenants
contained in the Credit Documents. This waiver is limited solely to the Existing
Default as of the date thereof, and nothing contained in this Amendment shall be
deemed to constitute a waiver of any other rights or remedies the Agent or any
Lender may have under the Credit Agreement or any other Credit Documents or
under applicable law.
3. AMENDED DEFINITION.
(a) The definition of "CURRENT RATIO" set forth in Section 1.1 of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
"CURRENT RATIO" means, as of the last day of any fiscal quarter of the
Borrower, with respect to the Borrower and its Subsidiaries on a
consolidated basis, the ratio of Current Assets on such day to Current
Liabilities on such day.
4. CURRENT RATIO. Section 7.9(c) of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:
(a) CURRENT RATIO. There shall be maintained with respect to the
Borrower and its Subsidiaries as of the end of each fiscal quarter to occur
during the periods shown, a Current Ratio greater than:
(i) From April 1, 1999 to and including March 30, 2000, 2.35 to 1.0;
and
(ii) From March 31, 2000 and thereafter, 2.75 to 1.0.
5. CONDITIONS PRECEDENT. The effectiveness of this Amendment is subject to
the satisfaction of each of the following conditions:
(a) The Agent shall have received original counterparts of this
Amendment duly executed by the Borrower, the Guarantors and the Required
Lenders; and
(b) The Agent shall have received an opinion from the counsel to the
Credit Parties as to authority, enforceability and such other matters as
may be required by the Agent.
6. MISCELLANEOUS.
(a) The term "Credit Agreement" as used in each of the Credit Documents
shall hereafter mean the Credit Agreement as amended by this Amendment.
Except as herein specifically agreed, the Credit Agreement, and the
obligations of the Credit Parties thereunder and under the other Credit
Documents, are hereby ratified and confirmed and shall remain in full force
and effect according to their terms.
<PAGE>
(b) The Borrower and the Guarantors, as applicable, affirm the liens
and security interests created and granted in the Credit Agreement and the
Credit Documents and agree that this Amendment shall in no manner adversely
affect or impair such liens and security interests.
(c) The Borrower and the Guarantors hereby represent and warrant as
follows:
(i) Each Credit Party has taken all necessary action to authorize the
execution, delivery and performance of this Amendment.
(ii) This Amendment has been duly executed and delivered by the Credit
Parties and constitutes each of the Credit Parties' legal, valid and
binding obligations, enforceable in accordance with its terms, except as
such enforceability may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar
laws affecting creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity).
(iii) No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or governmental authority or
third party is required in connection with the execution, delivery or
performance by any Credit Party of this Amendment.
(d) The Credit Parties represent and warrant to the Lenders that (i)
the representations and warranties of the Credit Parties set forth in
Section 6 of the Credit Agreement and in each other Credit Document are
true and correct as of the date hereof with the same effect as if made on
and as of the date hereof, except to the extent such representations and
warranties expressly relate solely to an earlier date and (ii) no unwaived
event has occurred and is continuing which constitutes a Default or an
Event of Default.
(e) The Guarantors (i) acknowledge and consent to all of the terms and
conditions of this Amendment, (ii) affirm all of their obligations under
the Credit Documents and (iii) agree that this Amendment and all documents
executed in connection herewith do not operate to reduce or discharge the
Guarantors' obligations under the Credit Agreement or the other Credit
Documents.
(f) This Amendment may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. Delivery of an executed
counterpart of this Amendment by telecopy shall be effective as an original
and shall constitute a representation that an executed original shall be
delivered.
<PAGE>
(g) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
[remainder of page intentionally left blank]
<PAGE>
Each of the parties hereto has caused a counterpart of this Amendment to be
duly executed and delivered as of the date first above written.
WORLDTEX, INC., a Delaware corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
REGAL MANUFACTURING COMPANY, INC., a
Delaware corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
ELASTIC CORPORATION OF AMERICA, INC., a
Delaware corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
WTX COLOMBIA II, INC., a Delaware
corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
WTX COLOMBIA I, INC., a Delaware corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
[SIGNATURES CONTINUE]
<PAGE>
WILLCOX & GIBBS FILIX OF DELAWARE, INC., a
Delaware corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
REGAL YARNS OF ARGENTINA, INC., a North
Carolina corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
NATIONSBANK, N.A., individually in its
capacity as a Lender and in its capacity as
the Agent
By:________________________________________
Name:______________________________________
Title:_____________________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:________________________________________
Name:______________________________________
Title:_____________________________________
BANQUE NATIONALE DE PARIS
By:________________________________________
Name:______________________________________
Title:_____________________________________
EXHIBIT 11.1
WORLDTEX, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $1,260 748 2,075 2,899
====== === ===== =====
Shares:
Weighted average number of 14,271 14,433 14,271 14,431
====== ====== ====== ======
shares outstanding
Basic earnings per share<F1> $.09 .05 .15 .20
==== === === ===
Shares:
Weighted average number of 14,271 14,433 14,271 14,431
shares outstanding
Assumed exercise of options - 302 - 327
-------- -------- -------- --------
Total average number of 14,271 14,735 14,271 14,758
====== ====== ====== ======
common and common
equivalent shares used for
dilution computation
Diluted earnings per share<F2> $.09 .05 .15 .20
==== === === ===
<FN>
<F1>
Basic earnings per share are calculated based upon the weighted average
number of common shares outstanding during the year.
<F2>
Diluted earnings per share are calculated based upon the weighted average
number of common shares and common equivalent shares outstanding during the
year.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 27.1
Worldtex, Inc.
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WORLDTEX,
INC. FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 10,830
<SECURITIES> 0
<RECEIVABLES> 54,425
<ALLOWANCES> 2,128
<INVENTORY> 59,964
<CURRENT-ASSETS> 127,412
<PP&E> 153,483
<DEPRECIATION> 43,391
<TOTAL-ASSETS> 327,761
<CURRENT-LIABILITIES> 44,594
<BONDS> 205,783
0
0
<COMMON> 147
<OTHER-SE> 65,603
<TOTAL-LIABILITY-AND-EQUITY> 327,761
<SALES> 151,624
<TOTAL-REVENUES> 151,624
<CGS> 124,579
<TOTAL-COSTS> 124,579
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 303
<INTEREST-EXPENSE> 9,958
<INCOME-PRETAX> 3,500
<INCOME-TAX> 1,425
<INCOME-CONTINUING> 2,075
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,075
<EPS-BASIC> .15
<EPS-DILUTED> .15
</TABLE>
